Lump sum vs recurring: invest it all now or a bit each month
Short answer: The same total can be invested in one go or spread over regular deposits. The only difference modelled here is timing: how long each dollar is in the account.
| Put in | Interest | Final value | |
|---|---|---|---|
| All now | $12,000 | $9,833 | $21,833 |
| Over 2 yr | $12,000 | $8,525 | $20,525 |
A steady rate cannot show the risk of investing everything just before a fall. This is timing arithmetic only.
An illustration under the assumptions listed below, not a forecast and not personal advice.
What problem does it address?
People with a windfall often wonder whether to invest it at once or in instalments. This page shows the arithmetic of the timing under a steady rate.
How does it work?
- Lump sum: the whole amount starts earning on day one.
- Recurring: the same total is split into equal monthly deposits, so most of it earns for less time.
- With a steady positive rate the lump sum ends higher; the gap is the cost of waiting.
Key terms
- Time in the account. Money invested earlier has more time to earn.
- Dollar-cost averaging. Spreading purchases over time to reduce the effect of buying at one price. A steady rate, as modelled here, cannot show that benefit.
What are the benefits?
- Shows the cost of waiting under a steady rate
- Helps size a decision about a windfall
What are the risks and limits?
- Real markets move up and down; spreading deposits can reduce the chance of investing everything just before a fall
- A steady rate hides that risk, so the lump sum looks stronger here than it can in practice
What does the simulator assume?
- One steady rate, no volatility
- Recurring deposits at the end of each month
- After the deposits finish, the balance keeps growing at the same rate
Different assumptions give different results. A figure here is a projection under these assumptions, not a prediction.
Where to read more
- SEC Office of Investor Education (Investor.gov): Plain-language guides to compound interest, saving and investing basics, and a compound interest calculator.
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Frequently asked questions
Is a lump sum always better?
Under a steady positive rate, yes, because the money is invested longer. Real returns vary, so the model shows timing only, not the risk of poor timing.
Why show it then?
To put a number on what waiting costs, so the choice is made with the figures in front of you.
Put your income, spending and goals into the Goal check to see how a plan sits against what you have left each month. Free, no bank sync.
Open the Goal checkThis page is for education. It shows what a strategy does under stated assumptions and is not personal investment advice.